TALX, Inc.; Analysis of Proposed Consent Order to Aid Public Comment, 25706-25708 [E8-10027]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 73, Number 89 (Wednesday, May 7, 2008)]
[Notices]
[Pages 25706-25708]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-10027]


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FEDERAL TRADE COMMISSION

[File No. 061 0209]


TALX, Inc.; Analysis of Proposed Consent Order to Aid Public 
Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order -- embodied in the consent 
agreement -- that would settle these allegations.

DATES: Comments must be received on or before May 28, 2008.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``TALX, Inc., File No. 061 0209,'' to 
facilitate the organization of comments. A comment filed in paper form 
should include this reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission/Office of the Secretary, Room 135-H, 600 Pennsylvania 
Avenue, N.W., Washington, D.C. 20580. Comments containing confidential 
material must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with Commission Rule 4.9(c). 16 CFR 
4.9(c) (2005).\1\ The FTC is requesting that any comment filed in paper 
form be sent by courier or overnight service, if possible, because U.S. 
postal mail in the Washington area and at the Commission is subject to 
delay due to heightened security precautions. Comments that do not 
contain any nonpublic information may instead be filed in electronic 
form by following the instructions on the web-based form at https://
secure.commentworks.com/ftc-TALX. To ensure that the Commission 
considers an electronic comment, you must file it on that web-based 
form.
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC website, to the extent 
practicable, at www.ftc.gov. As a matter of discretion, the FTC makes 
every effort to remove home contact information for individuals from 
the public comments it receives before placing those comments on the 
FTC website. More information, including routine uses permitted by the 
Privacy Act, may be found in the FTC's privacy policy, at (https://
www.ftc.gov/ftc/privacy.shtm).

FOR FURTHER INFORMATION CONTACT: Sean Hughto, FTC Bureau of 
Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580, (202) 
326-2199.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for April 28 2008), on the World Wide Web, at (https://www.ftc.gov/os/
2008/04index.htm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order 
(``Agreement'') from TALX Corporation (``Proposed Respondent''). The 
Consent Agreement settles allegations that TALX has violated Section 7 
of the Clayton Act, as amended, 15 U.S.C. Sec.  18, and Section 5 of 
the Federal Trade Commission Act, as amended, 15 U.S.C. Sec.  45, by 
substantially lessening competition in connection with the provision of 
outsourced UCM services and employer verification services nationwide 
through a series of consummated acquisitions. Pursuant to the 
Agreement, TALX has provisionally agreed to be bound by a proposed 
consent order (``Proposed Consent Order'').
    The Proposed Consent Order has been placed on the public record for 
thirty (30) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
Agreement and the comments received and will decide whether it should 
withdraw from the Agreement or make final the Agreement's Proposed 
Consent Order.
    The purpose of the Agreement is to remedy anticompetitive effects, 
alleged in the Commission's Complaint in this matter, that will likely 
result from the acquisitions by Proposed Respondent of James E. Frick 
Inc., Johnson & Associates, L.L.C., and certain assets and businesses 
of Gates McDonald & Company, Sheakley-Uniservice, Inc., UI Advantage, 
Jon-Jay Associates, Inc., and Employers Unity, Inc.
    The Proposed Consent Order provides for relief in two markets where 
the Commission finds reason to believe that these acquisitions likely 
will have anticompetitive effects: the national market for outsourced 
unemployment compensation management (``UCM'') services, and the 
national market for outsourced employer verification

[[Page 25707]]

services, also known as the market for verification of income and 
employment (``VOIE'') services.
    The Proposed Consent Order is aimed at expediting the entry and 
expansion of competitors by, among other things, freeing past, as well 
as various current, TALX employees to take jobs with competitors and by 
granting the majority of TALX's present long term contract customers 
the unilateral right to get out of those contracts and switch to 
another UCM provider. While the Commission usually typically prefers 
divestitures that immediately reset market shares (the sale of a plant 
in the manufacturing context, for example), unique circumstances 
combine in this matter to make it appropriate for the Commission to 
accept relief aimed at encouraging the movement of market share to 
competitors though self-selection by TALX's customers, as opposed to 
mandating the transfer of arbitrary set of these service contracts. 
These circumstances include, but are not necessarily limited to, the 
personal service nature of the product, divergent customer preferences 
and needs, and the existence of several very small, but nevertheless 
viable, competitors. The proposed remedy seeks to ensure that the entry 
and expansion necessary to ensure a competitive market can occur much 
more quickly than it would absent relief. More specifically, the 
Proposed Consent Order requires TALX to (a) allow many of its customers 
with long-term UCM contracts to terminate those contracts at the 
customers' option, (b) free many of its past and current employees from 
restrictions that would hamper their ability to be employed by UCM 
competitors, (c) provide, if requested, to certain former UCM customers 
of TALX, certain information related to UCM claims work retained by 
TALX, (d) give notice to certain customers of their right to cancel UCM 
contracts that are automatically renewed if not cancelled, and (e) not 
prevent or discourage any entity from supplying goods or services to a 
UCM competitor of TALX.
    The Order also requires TALX to give to the Commission prior notice 
of future acquisitions in markets for UCM services and VOIE services.

II. The Respondent

    TALX is a Missouri corporation that, in May 2007, became a wholly-
owned subsidiary of Equifax, Inc. TALX's primary businesses are the 
provision of UCM services under the name ``UC eXpress,'' and the 
provision of VOIE services under the name ``The Work Number.''

III. The Complaint

    As alleged in the Commission's Complaint, TALX competes in markets 
for UCM services and VOIE services. UCM services consist, in part, of 
the managing, administering, and/or processing, on behalf of an 
employer, of unemployment compensation claims filed with a state or 
territory. VOIE services consist, in part, of the provision of 
employment and income verifications including, but not limited to, the 
collection, maintenance, or dissemination of information concerning the 
employment status and income of those employees. In order to provide 
such VOIE services, a VOIE provider must collect and maintain payroll 
data and other data relating to employment.
    The Complaint alleges that the March 2002 acquisitions by TALX of 
James E. Frick, Inc. and of the UCM services division of Gates McDonald 
eliminated competition between the two acquired companies in the 
national market for UCM services. James E. Frick, Inc. and Gates 
McDonald were the two largest providers of UCM services prior to TALX's 
acquisition of both companies the same day. The Complaint also alleges 
that TALX's acquisitions of Johnson and Associates, L.L.C., the UCM 
assets of Sheakley-Uniservice, Inc., Jon-Jay Associates, and the 
unemployment tax management business, which includes UCM services, of 
Employers Unity, Inc. substantially reduced competition in the national 
market for UCM services.
    The Complaint further alleges that TALX substantially reduced 
competition in the nationwide provision of VOIE services through the 
acquisitions of James E. Frick, Inc., and the VOIE businesses of 
Sheakley-Uniservice, Inc. and Employers Unity, Inc.
    The Complaint notes that some firms, known as ``alliance 
partners,'' outsource to TALX some of the UCM services they sell to 
others. The largest amount of such outsourcing is done by ADP, Inc.
    The Complaint alleges that each of the relevant markets is highly 
concentrated, and the consummated acquisitions increased concentration 
substantially, whether concentration is measured by the Herfindahl-
Hirschman Index (``HHI''), or the number of competitively significant 
firms remaining in the market.
    The Complaint further alleges that entry would not be timely, 
likely, or sufficient to prevent anticompetitive effects in either of 
the relevant markets. As alleged in the Complaint, entry into the 
market for the provision of outsourced UCM services to large multi-
state employers is difficult and slow. According to the Complaint, 
among the factors that make entry into this market difficult and slow 
are the length of time it normally takes to make a sale, the maturity 
of the market, and the lengthy period necessary to establish a track 
record for successfully managing large volumes of unemployment 
compensation claims. The Complaint also alleges that entry and 
expansion in the provision of outsourced UCM services to large multi-
state employers is made more difficult by the large number of customers 
that are tied to long-term contracts with terms as long as five- years. 
Prior to TALX's acquisition of its leading competitors who can serve 
large employers with multi-state claims, the vast majority of industry 
contracts were renewable one year relationships. In recent years, TALX 
has successfully and vigorously pursued three and five year deals with 
its clients. The prevalence of long-term contracts and non-compete and 
non-solicitation agreements between TALX and its employees, which 
substantially reduce the number of experienced and talented employees 
available to be hired by TALX's competitors and potential competitors, 
has made entry and expansion more difficult and slow.
    The Complaint also alleges that entry into the market for VOIE 
services is difficult and slow. Among the factors that make entry into 
this market difficult and slow are, according to the Complaint, the 
need to acquire a sufficient scale and scope of payroll and employment 
data to attract and service a sufficient customer base, the difficulty 
of developing software to automate the VOIE process, and the need to 
build a reputation for reliability and security.
    The Complaint alleges that the consummated acquisitions eliminated 
competition between TALX, and each of its competitors in the provision 
of outsourced UCM services and employer verification services 
nationwide. The Complaint further alleges that the consummated 
acquisitions enhance opportunities for TALX to increase prices 
unilaterally and to decrease the quality of services provided in each 
of the relevant markets. The acquisitions by TALX eliminated the 
closest competitors able to serve large employers with claims in many 
states or nationwide.
    The Complaint alleges that the consummated acquisitions violate 
Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec.  18, and 
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 
Sec.  45, by substantially lessening competition in

[[Page 25708]]

connection with the provision of outsourced UCM services and employer 
verification services nationwide. The Complaint further alleges that 
the Acquisitions described have eliminated direct and actual 
competition in the provision of both UCM and employer verification 
services. The acquisitions by TALX of its competitors have enhanced its 
ability to increase prices unilaterally and enhanced its ability to 
decrease the quality of services provided in each of the relevant lines 
of commerce, according to the Commission's Complaint.

IV. The Proposed Consent Order

    As noted above, the Proposed Consent Order provides for relief in 
markets for UCM services and VOIE services.
    Paragraph II. of the Proposed Consent Order prohibits TALX from 
enforcing against certain current and former employees who accept 
employment with certain UCM competitors of TALX certain types of 
covenants not to compete, not to solicit, and not to disclose trade 
secrets. Paragraph I.P.1. of the Proposed Consent Order lists some of 
those UCM competitors by name, and Paragraph I.P.2. lists criteria for 
identifying other such UCM competitors. Paragraphs I.DD., I.FF., and 
I.TT. of the Propose Consent Order describe the types of restrictions 
on competition, solicitation, and trade secret disclosure that TALX 
would not be able to enforce in situations where Paragraph II. of the 
Proposed Consent Order is applicable.
    Paragraph II. of the Proposed Consent Order divides the past and 
current employees subject to this paragraph into three categories: 
``Relevant Current Persons,'' ``Relevant Past Persons,'' and ``Other 
Relevant Current Persons.'' Appendix F to the Proposed Consent Order 
lists all of such Relevant Current Persons and divides them into five 
categories: Customer Relationship Managers, Account Managers, 
Unemployment Insurance Consultants, Hearing Representatives, and Tax 
Consultants. The third proviso to Paragraph II. of the Proposed Consent 
Order limits the number of Relevant Current Persons that are subject to 
Paragraph II. of the Proposed Consent Order to ten Customer 
Relationship Managers, four Account Managers, twenty-three Unemployment 
Insurance Consultants, five Hearing Representatives, and four Tax 
Consultants. In addition, the applicability of Paragraph II. of the 
Proposed Consent Order to a Relevant Current Person will end two years 
after such person's receipt of the notice that TALX is required to send 
such person pursuant to Paragraph VI.A. of the Proposed Consent Order.
    The other two categories of past and current employees, ``Relevant 
Past Persons,'' and ``Other Relevant Current Persons,'' are defined in 
Paragraphs I.HH. and I.MM. of the Proposed Consent Order. There is no 
limit on the number of Relevant Past Persons and Other Relevant Current 
Persons who are subject to Paragraph II. of the Proposed Consent Order; 
and that paragraph will apply to those persons for the full ten-year 
term of the Proposed Consent Order.
    Paragraph III. of the Proposed Consent Order provides that TALX 
must allow certain customers with contracts for UCM services with a 
term longer than one year to terminate their contracts on 90 days 
notice if those customers outsource their UCM services to a competitor 
of TALX. Paragraph I.X. of the Proposed Consent Order specifies the 
customers covered by Paragraph III. of the Proposed Consent Order. The 
third proviso to Paragraph III. places an upper limit of $10 million on 
the ``Total Of Relevant Values Of Terminated Long Term Contracts,'' 
within the meaning of Paragraph I.XX. of the Proposed Consent Order. In 
addition, the applicability of Paragraph III. of the Proposed Consent 
Order to a customer will end three years after such customer's receipt 
of the notice that TALX is required to send such customer pursuant to 
Paragraph VI.B. of the Proposed Consent Order.
    Paragraph IV. of the Proposed Consent Order provides, that at the 
request of a ``Former UCM Customer,'' within the meaning of Paragraph 
I.TT of the Proposed Consent Order. TALX must transfer certain 
specified customer file information to such customer. The information 
to be transferred would include data relating to open unemployment 
compensation claims and to state unemployment tax rates, and include 
documents generated in preparation for unemployment compensation 
hearings and appeals.
    Paragraph V. of the Proposed Consent Order prevents TALX from 
entering into agreements that would prevent or discourage any entity 
from supplying goods or services to a UCM competitor of TALX. This 
paragraph does not apply to employment agreements.
    Paragraphs VI.A., VI..B., and VI.C. of the Proposed Consent Order 
require TALX to give notice to certain current and former employees and 
to certain long-term contract customers of their rights under 
Paragraphs II. and III. of the Order.
    Paragraph VI.D. of the Proposed Consent Order requires that TALX 
notify certain customers of their right to cancel UCM contracts that 
would otherwise be renewed automatically.
    Paragraph VI.E. of the Proposed Consent Order requires the posting 
on Web sites of specified information concerning the rights of certain 
current and former employees of TALX and of certain UCM customers of 
TALX under Paragraphs II. and III. of the Order,
    Paragraph VII.A. of the Proposed Consent Order prohibits TALX from 
entering into, or attempting to enter into, agreements to divide or 
allocate markets for UCM services.
    Paragraph VII.B. of the Proposed Consent Order prohibits TALX from 
entering into, or attempting to enter into, any agreement requiring 
ADP, Inc. to subcontract to TALX the rendering of UCM services to a 
customer if such agreement precedes, rather than follows, ADP, Inc.'s 
agreement with such customer to provide UCM services. The purpose of 
Paragraph VII.B. is to increase the ability of TALX's current and 
future competitors to compete against TALX for the business of 
providing UCM services to customers of ADP.
    Paragraph VIII. of the Proposed Consent Order requires that, for 
ten (10) years, TALX give the Commission thirty (30) days advance 
notice before acquiring, or entering into a management contract with, a 
provider of UCM services or VOIE services.
    Paragraph IX. of the Proposed Consent Order appoints Erwin O. 
Switzer to the position of Monitor/Administrator. The Monitor/
Administrator will assist the Commission in monitoring TALX's 
compliance with the Proposed Consent Order, and will assist certain 
past and present employees of TALX and certain customers of TALX in 
exercising their rights under Paragraphs II. and III. of the Order.
    Paragraphs X., XI. and XII. of the Proposed Consent Order require 
TALX to comply with certain reporting requirements to the Commission.
    Paragraph XIII. provides that the Proposed Consent Order will 
terminate ten years after it goes into effect.
    By direction of the Commission.

Donald S. Clark,
Secretary.
[FR Doc. E8-10027 Filed 5-6-08: 8:45 am]
BILLING CODE 6750-01-S